Literature review Academic writing Words: 2049
The effect of JIT on obtaining competitive advantages in the automotive industry
Bjorn Stokman1
1 Pre-master Business Administration, University of Twente, Enschede, Netherlands
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These days there is a growing competition in the world market since the globalization companies do not only need to stand out over the companies from their own country, other than that they need to be competitive for the companies all over the world. This case is also common for the automotive industry. There are a lot of management tools to gain some competitive advantages. This literature review researches, in particular, the JIT (Just In Time) strategy used in the automotive industry. For instance, is it suitable that the companies in the automotive industry use this strategy to get advantages over their competition or are there any disadvantages for it? The hypothesis is that the effect of the implementation of JIT has a positive effect on the automotive company in case of obtaining competition advantages.
1 Introduction
Nowadays the competition in the automotive industry and other industries are becoming more and more complex because of the increasing globalization. The trade barriers are slowly disappearing, for this reason, companies do not only have competition from their own country but from all over the world (Gover & Harris, 2009).
Nowadays due to this globalization phenomenon companies are forced to stand out over their competition. Reducing costs, improving quality, satisfying customers and diversity in products and services are examples of areas in which the companies nowadays try to get a competitive advantage (García Alcaraz et al., 2016), (Dinsdale & Bennet, 2015).
The problem in the automotive industry which causes this research is: When companies will not focus on one of these areas they will get stuck at the same place and the competition will go past them and have so many advantages against them that the companies cannot compete anymore. Furthermore, not having any advantages against your competition will lead to serious problems like decreasing sales, incompetent products, Low production time and so on. This will finally lead to a bankruptcy of these automotive companies. There are a lot of strategies to achieve competitive advantages. However, this research is focused on one specific strategy, the JIT strategy (Dinsdale & Bennett, 2015).
The JIT strategy is an often used strategy to gain advantages over the competition. However, is this JIT strategy effective for getting competition advantages for automotive companies? The goal of this literature review is to research what the effect from the JIT strategy is on getting competition advantages. The research question to research this particular goal is:
“What is the effect of using the JIT strategy in automotive companies in case of getting competitive advantages?”
2 JIT (Just In Time)
JIT is originally seen as a strict production system for organizations. JIT is an abbreviation of Just In Time. This strategy is historically a manufacturing philosophy which is founded in Japan by Ohno (1982) and first used by Toyota. Another name for JIT is TPC which is an abbreviation of the Toyota Production System. Ohno (1982) the founder of the JIT strategy, defines JIT as a system to have the right parts at exactly the right time, in the right quantity at the right place for assembly (Ohno, 1982) (Ahmad, Schroeder, & Sinha, 2003).
The JIT system was used by Toyota to reduce waste in the production process and in particular reducing production time. Making use of the full capacity of every worker, decreasing movement of raw materials, Decreasing work in process, Shrink the inventory as much as possible. This way of working mostly helped to detect other improvements of the production processes. According to García Alcaraz et al. (2016) aspects from the production cycle as organizational management, planning, flexible work in production lines, inventory management, raw material transport, high-quality relationships and so on are all covered by the JIT strategy. Likewise, JIT also covers all stages of the production process. Stages of product design, physical distribution, production, processing, Sales and so on. JIT is a strategy which covers all activities from designing the product to the sales of the product(s) of a company (García Alcaraz et al., 2016).
Green, Inman, Birou & whitten (2014) also saw JIT as a strategy which originally was seen as a strict production system. With the main goal of reducing and eliminating waste. However, nowadays JIT is more and more seen as a general management system. The goal of this strategy is satisfying costumers and gain some advantages opposite the competition. Originally JIT is focussed on the production process inside the company, however, with the years it included more and more the whole supply chain of companies. This includes purchasing and selling (Green, Inman, Birou, & Whitten, 2014).
Shakakibara et al. (1993) did an empirical research on JIT about finding the independent factors of the JIT system. They concluded with their research that JIT can be all-encompassed in three different independent factors. The first factor is the management of people, the second one is a simplified physical flow and the last factor is supplier management (Ahmad et al., 2003).
3 Benefits of JIT.
While there is more and more competition due to the globalization of the world’s automotive market it becomes even more important to stand out over the competitors nowadays to keep your head above water (Gover & Harris, 2009).
JIT claims that it helps to improve the efficiency and reduce the waste of a company, however, are these things true? Are there any benefits of using the JIT strategy in case of getting competitive advantages in the automotive market? And when there are advantages what are these advantages?
Garcia Alcaraz et al. (2016) did do a research about the benefits of a successful JIT implementation into a company. After searching through literature Garcia Alcaraz et al. (2016) came to 31 benefits of a successful implementation of the JIT system. This list of benefits is ordered by how many times it is quoted in other works. This concluded that increased production is the most quoted benefit, number two is increased product quality, reduction of waste and increasing worker motivation are together located on the third place because of the same amount of quotations (García Alcaraz et al., 2016).
To see if this order of benefits is correct Alcaraz et al. (2016) interviewed 144 managers of companies in Mexico and asked them to score every different benefit of JIT to see if the conclusion by ordering by quotations is correct for Mexico. Garcia Alcaraz et al. (2016) did conclude that the order of the most important benefits is different in Mexico after asking the managers. The most important benefit is increased process efficiency, after this improved worker motivation, increased teamwork and increased product quality. Nevertheless, These are results only from Mexico and the results from the literature are from all over the world. They also concluded that every benefit from the 31 is obtained after correct implementation of JIT. Therefore, it can be concluded that JIT can accomplish competition advantages when implementing it (García Alcaraz et al., 2016).
Other researchers also found benefits of implementing JIT to gain competitive advantages. For example, Bevilacqua, Ciarapica & De Sanctis (2017) concluded that there are two specific types of waste which can be noticed by JIT and can be improved by making use of JIT: Work-in-process inventory and delays in the flow time which are unnecessary (Bevilacqua, Ciarapica, & De Sanctis, 2017).
Qureshi, Iftikhar, Bhatti, Shams & Zaman (2013) founded that JIT improves the communication within a company and between the companies and its customers. They also concluded that JIT also removes waste in the production process (Qureshi, Iftikhar, Bhatti, Shams, & Zaman, 2013).
Erkayman (2018) concluded that implementing JIT will result in increasing effectiveness of the supply chain, agility and the efficiency of the supply chain. This includes the elimination of waste in the production cycle (Erkayman, 2018).
4 Drawbacks on JIT
While there are a lot of benefits in case of getting competition advantages in the automotive industry when implementing JIT, are there any disadvantages when implementing JIT? Furthermore, is JIT successful in every automotive company when it is implemented?
The drawback of implementing JIT is that a small error somewhere in the (production)schedule will lead to problems in the whole supply chain internal (the own company) and external (with the customers which are waiting for their products before they can continue). Behnamian, Zandieh & Fatemi Ghomi (2010) did do a research on this drawback of the implementation of JIT. They concluded that a small mistake somewhere in the supply chain will lead to “tardiness costs” or an “earliness penalty”. Tardiness costs are costs when a company delivers to late, for an earliness penalty can be explained in the same way only instead of delivering products to late the products are delivered to early (Behnamian, Zandieh, & Fatemi Ghomi, 2010), (Dinsdale & Bennett, 2015).
According to Qureshi et al. (2013), the problem that one small error somewhere in the process will cause problems in the whole supply chain internally and externally is more harmful to smaller and less powerful companies. This is for a reason for smaller companies to not implement JIT into their company (Qureshi et al., 2013).
Another important point of attention is that JIT is not suitable for every automotive company to gain advantages against the competition. There are different circumstances and aspects where a company need to think about when it is willing to implement JIT. González-Benito (2002) researched these different aspects and concluded that the most important aspects are the specificity and the technological complexity of the product. When a company is dependent on a particular product is the most ideal situation to deliver JIT(González‐Benito, 2002). An example of bad circumstances for implementing JIT by Mishra, D.K. (2009) of a company for which it is not suitable to make use of JIT is a company who delivers a small quantity order to a lot of different companies in different countries. This makes it very difficult to work with JIT (Dinsdale & Bennett, 2015).
5 Conclusion
Due to the globalization and the increasing competition in the automotive market automotive companies need to create competitions advantages to stay ahead of their competitors. When these companies do not accomplish some advantages they will get in trouble because their customers will leave them for better competitors. For this reason, companies need to use tools to obtain get ahead of the competition. One of these tools is JIT.
Because of this evolution of the automotive market, the question which is researched during this literature review is:
“What is the effect of using the JIT strategy in automotive companies in case of getting competitive advantages?”
The conclusion is that the effect of using JIT in automotive companies to gain competitive advantages is different in all companies in the automotive market. Every company does participate in different circumstances and is having different products and services with different aspects.
First, it is important to see if the circumstances of the company are suitable for implementing JIT for the company. When the circumstances are good it is important to check if the aspects of the product or service are suitable for JIT as well.
When a company is suitable to implement JIT the effect will always be positive since there are a lot more benefits than drawbacks for JIT. There are 31 benefits of implementing JIT when an automotive company is able to implement JIT to the company. There are some little drawbacks, however, these way too little to turn the use of JIT into a negative effect in case of getting competitive advantages.
6 Discussion
To obtain the information to answer the research question in the conclusion there are 12 scientific articles used in total. These 12 articles were enough to make a valid and trustworthy conclusion.
The conclusion made clear that the hypotheses of the research are partly correct. Since there is not always a positive effect. However, when an automotive company is suitable for implementation of JIT the effect is always positive.
A suggestion for further research is to research under which circumstances a company can implement JIT to obtain the positive effect of it. The same for what aspects an automotive company needs to implement JIT to gain the positive effect of it.
Reference list
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Behnamian, J., Zandieh, M., & Fatemi Ghomi, S. M. T. (2010). Due windows group scheduling using an effective hybrid optimization approach. The International Journal of Advanced Manufacturing Technology, 46, 721–735. https://doi.org/10.1007/s00170-009-2147-z
Bevilacqua, M., Ciarapica, F. E., & De Sanctis, I. (2017). Lean practices implementation and their relationships with operational responsiveness and company performance: an Italian study. International Journal of Production Research, 55(3), 769–794. https://doi.org/10.1080/00207543.2016.1211346
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Erkayman, B. (2018). Transition to a JIT production system through ERP implementation: a case from the automotive industry. International Journal of Production Research, 1–11. https://doi.org/10.1080/00207543.2018.1527048
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